Privatisation policy doesn't hold water

The state aims to privatise water and other infrastructure with a flawed platform of public-private partnerships, writes Kenneth Davidson.

According to the opinion polls, Australians don't like privatisation. It has been foisted on them with promises of better, cheaper services, which in the main haven't been kept.

In modern society, electricity, banking, telecommunications and water reticulation in urban areas are essential services.

Water is the last essential service to be privatised.

The issue is sufficiently sensitive that the Bracks Government in its policy platform passed this month at the Labor state conference said that "Labor will legislate to ensure that public ownership of the water industry is entrenched in the constitution".

Why? The simple answer is that water will be privatised from within. Instead of selling off the water authorities, the government will contract out, through public-private partnerships (PPPs), the profitable bits of the business such as water purification plants.");document.write("

advertisement

");
}
}
// -->

This raises the question of why expensive water purification plants are needed if the water authorities have the necessary backing to ensure that the headwaters are protected in the first place.

Public-private partnerships are not partnerships, they are long-term principle/agent contracts, and they are a more expensive way of financing infrastructure than the conventional way through public borrowing.

The platform that the Bracks Government rammed through the ALP conference opens the way for a new wave of privatisation via PPPs.

According to the document: "Labor will ensure core services are in full public control, particularly for human service areas - health, education, community services, emergency services and prisons."

This can be read to mean that the Bracks Government will go full steam ahead to privatise the physical infrastructure necessary in the provision of all these services such as public hospitals, schools and the remaining government prisons.

Elsewhere, Treasurer John Brumby promises that there are $4 billion of PPPs in the pipeline and they will go ahead only after it has been shown that they will produce superior service and value for money.

Really? Is the government getting value for money for the sale and leaseback of police stations and adjoining court complexes? The Auditor-General didn't think so. Why would schools be any different?

Is the state getting value for money for its redevelopment of the Spencer Street railway station, or is it simply an excuse for a redevelopment rip-off at the western end of the CBD? Why won't the government release the information showing that Victorians are better off paying $1 billion over 30 years to the developers instead of borrowing the $350 million upfront to build the station and sell off the development site separately?

If the contract is still "commercial in confidence", how can it be "open and accountable" as promised in the platform?

The record of the Bracks Government in its relationships with developers shows it cannot be trusted. It promises in the platform that "it will increase transparency and accountability measures for major infrastructure projects.

In particular Labor will publish a public interest statement on all infrastructure projects, publish all contracts within six months of the final contract being signed (and) consult with the community and stakeholders".

So where was the public interest statement, transparency and genuine consultation for the decision to build the Commonwealth Games village at Royal Park?

The community loses a park and $85 million. How much does the private developer make?

From a planning perspective, the Games village should have been built at Jolimont or Docklands.

It insults the intelligence and commitment of a lot of good people in Melbourne who argued for the Docklands when the government dismissed the site because "it would have required high-rise office space being converted into housing for the Games and then back to office space afterwards".

It takes real gall to run this whopper. There is no office tower built to be converted. There are no conversion costs. Docklands is a brownfield site. Good government requires that it take a leadership role in planning. The government wants to put an additional 70,000 people into inner Melbourne by 2030. Does it intend to put them all in parks?

The platform boasts that the Bracks Government has reduced public debt from 3.3 per cent to 1.4 per cent of gross state product (GSP).

What it doesn't say is that the present-day capital value of PPPs already signed by the state totals $15 billion, or about 9.3 per cent of GSP. PPPs are simply a way of disguising government debt by pushing it off the balance sheet in the mode of Enron.

Enron had been transformed by haute finance from an electricity company into a virtual electricity company, which is not that much different to the strategy of the Bracks Government. It appears determined to become a virtual government under the influence of the same loopy economic ideas as the Enron management.

I believe about half the Bracks ministry is deeply concerned about the direction John Brumby is taking the state finances, but they are confused by Brumby's articulation of the message and intimidated by the backing he receives from the senior members of the state bureaucracy who he inherited from the the previous government.